What Is Optimism (OP)? The Layer 2 Solution Sticking to Ethereum’s Fundamental Values

Dec 21, 2023

Ethereum is celebrated for its pioneering role in introducing smart contracts to the world. However, the network faces a problem known as the “scalability trilemma.” While it excels in security and decentralization, its scalability has been a persistent issue.

The network's ability to process transactions is limited, leading to congestion, high gas fees, and slower transaction times, especially during periods of high demand. These limitations affect the user experience and restrict the broader adoption and practical application of Ethereum-based applications.

This is where Optimism steps in, offering a solution that is not only innovative but essential for the future of Ethereum and blockchain technology.

How Does Optimism Work?

In order to solve Ethereum's scalability issues, Optimism implements a technology called optimistic rollups (ORs). This method allows for bundling or 'rolling up' multiple transactions into a single transaction. These bundled transactions are then executed on the Ethereum mainnet (Layer 1), significantly reducing the processing load on the Ethereum network.

Optimistic rollups function by assuming that all transactions are valid by default, bypassing the need for complex computation and verification on every transaction. This assumption dramatically accelerates the transaction processing speed.

To maintain security, ORs also incorporate a system where transactions can be disputed. For a certain period, other network participants can challenge the validity of a transaction and verify it if necessary.

This combination of assumed trust and the ability for verification strikes a balance between speed and security. By enabling this, Optimism not only boosts the throughput of transactions but also maintains the integrity and trustworthiness of the Ethereum network.

In essence, optimistic rollups provide a streamlined and efficient approach to handling transactions, without sacrificing the decentralized and secure nature central to Ethereum.

The Optimism Ecosystem

OP Token

At the heart of Optimism's ecosystem is the OP token. This token plays a crucial role in the governance and functionality of the Optimism network. The OP token is used for various purposes, including paying transaction fees and participating in the governance of the Optimism network.

The governance aspect is particularly important as it allows OP token holders to have a say in the future development of the network. This decentralized approach to decision-making ensures that the network evolves in a way that best benefits its community.

Applications and Adoption

The Optimism ecosystem is robust and growing, with a variety of dApps already built on it. Decentralized exchanges (DEXs), lending platforms, and other DeFi applications have found a home on Optimism, benefiting from its enhanced transaction efficiency and reduced costs.

One notable application is Velodrome, a decentralized exchange that has gained significant traction. This platform, like many others on Optimism, benefits from faster and cheaper transactions, making it one of the first DEXs to offer an almost “centralized exchange (CEX) - like” experience for traders.

The adoption of Optimism by these applications underscores its importance in the DeFi space. As more developers and users recognize the benefits of Optimism, its adoption is likely to grow, further strengthening its position in the blockchain ecosystem.

The Optimism Collective: A New Paradigm in Blockchain Governance

The Optimism Collective represents Optimism's commitment to adhere to Ethereum’s (and blockchain’s) fundamental values of decentralization. It is a unique experiment in blockchain governance and public goods funding that brings together various stakeholders, including companies, communities, and individuals, all united in their goal to support Ethereum's ecosystem.

Governance Structure of the Optimism Collective

The governance system within the Optimism Collective is divided into two parts: the Token House and the Citizens' House. This ensures a balanced approach to decision-making, combining token-based and democratic principles.

The Token House

The Token House, initiated with the distribution of the OP token, involves stakeholders who actively participate in governance by voting on key proposals. These include protocol upgrades, funding decisions, and inflation adjustments.

Anyone with OP tokens can participate in the governance of the token house, and its governance structure is similar to that of many other decentralized protocols.

The Citizens' House

On the other hand, the Citizens' House is where Optimism’s governance system is truly unique. The Citezens House is an experiment in non-plutocratic governance.

To participate in the citizens’ house governance, one must navigate through a unique, evolving system of identity-based governance. It represents individual human stakeholders: builders, users, and community members aligned with the project's values.

The selection of Citizenship in the Citizens' House utilizes a neutral, permissionless attestation contract known as the AttestationStation. Through this, Optimism Governance (encompassing both Token and Citizens’ Houses) can use any reputation data written to the AttestationStation contract to determine Citizenship in future iterations of the Citizens’ House. This flexible system is designed to be adaptable and future-proof, adhering to the principle of iterative governance.

Optimism governance aims to eventually distribute Citizenship widely across the Optimism ecosystem, encompassing a diverse group of individuals with expertise in various subcultures and industries.

Future Prospects and Developments

OP Superchain

One of the most exciting prospects is the development of the Optimism Superchain. This initiative represents a significant leap towards a more interoperable and modular blockchain ecosystem. The Optimism Superchain aims to enable the creation of app-specific blockchains, offering even more customization and flexibility for developers.

This development could potentially revolutionize how dApps are built and interact with each other, making Optimism a central player in the future of blockchain technology.

Future Partnerships

Collaborations and integrations with other projects are also on the horizon. Partnerships with prominent blockchain entities like Coinbase and A16Z, who are building with the OP Stack, signify Optimism's growing influence and potential.

These collaborations help to enhance Optimism's capabilities and expand its reach within the blockchain community.

Stake Your Claim In the Future of Layer 2

The growing ecosystem of dApps on Optimism, its governance model, and future developments paint a picture of a vibrant and evolving network. Optimism is not just a solution for today’s challenges; it's a foundation for tomorrow's blockchain innovations.

As the blockchain world evolves, solutions like Optimism will play a crucial role in shaping its future. You can stake your claim in this future by purchasing OP tokens through the “Ethereum’s Scaling Race” Bundle on Bake, where OP is bundled with Arbitrum (ARB) and Polygon (MATIC), diversifying your investment over the three major projects providing scalability solutions for Ethereum.

DISCLAIMER: Please note that the information on this blog and in any articles posted on this blog is for general information only and should not be relied upon as financial advice. Cake Pte. Ltd., Bake, UAB, and its affiliates (the “Cake Group”) are not licensed financial advisers. You may wish to approach your own independent financial advisor before making any decision to buy, sell or hold any product and/or digital assets mentioned in this blog.

Any views, opinions, references, assertions of fact and/or other statements are not necessarily the views held by the Cake Group. The Cake Group disclaims any liability whatsoever that may arise out of or in connection with such statements. Always do your own research before investing in any financial assets and consult a qualified financial advisor if necessary.



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